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Did the budget speech address SA's current challenges?

22 February 2024 Photo SUPPLIED

Opinion article by Eugene Msizi Buthelezi, nGAP Lecturer in the Department of Economics and Finance, University of the Free State.

Finance Minister Enoch Godongwana delivered the 2024 National Budget Speech on Wednesday 21 February 2024. The speech centred around promoting economic growth, addressing inequality, and ensuring sustainable development in South Africa. Minister Godongwana emphasised the importance of expanding the national pie through economic measures while also focusing on the distribution of resources to achieve social and economic justice. Monetary policy spillover to fiscal policy was evident, as the minister referenced the utilisation of the Gold and Foreign Exchange Contingency Reserve Account (GFECRA). This budget speech came at a time of significant economic challenges in South Africa, including the following:

Falling economic growth projection, reflecting that there are still persistent challenges in addressing unemployment, poverty, and inequality.
Eskom's financial woes and operational inefficiencies, which remain a critical concern.
Rising government debt, budget deficits, and debt-service expenses are among current pressing issues.
Tax adjustments, which are needed more than ever to bolster government revenue, alongside social grant increases to support vulnerable populations.
Public-private partnerships for economic growth, job creation, and enhanced productivity.

Domestic economy and fiscal outlook

The growth outlook for South Africa between 2024 and 2026 is expected to average 1,6%, indicating a shortfall of 3,4% from the targeted economic growth of 5% as outlined in the National Development Plan's vision for 2030. This discrepancy reflects the challenges facing the South African economy in addressing issues such as unemployment, poverty, and inequality. Nevertheless, the minister pointed out key policy initiatives in the budget speech. This included the implementation of measures to enhance procurement efficiency and promote local industrialisation. Moreover, structural reform in sectors such as electricity, logistics, water, and telecommunications to stimulate growth.

On the other hand, the elephant in the room – Eskom – remains a significant challenge in the South African economy. Eskom, the state-owned electricity utility, has been plagued by financial difficulties, operational inefficiencies, and power supply constraints, leading to frequent load shedding and disruption of economic activities. However, in the 2024 Budget Speech, Eskom was granted a debt-relief plan to alleviate its financial burden and allow the entity to focus on its core business operations. It was noted that Eskom's coal-fired power stations are being fixed and renewable energy projects are in the pipeline to promote and further enhance energy security. These interventions will ensure operational efficiency, enhance energy security, reduce reliance on fossil fuels, reduce the frequency of load shedding, and minimise disruptions to businesses and households. Despite this, Eskom may still require significant financial investments, potentially increasing the financial burden. Moreover, integrating renewable energy and restructuring Eskom's operations may face resistance or challenges in implementation, leading to transitional disruptions.

In terms of infrastructure, the minister pointed out that partnerships between the public and private sectors to finance projects are key to delivering infrastructure projects. It is expected that infrastructure investment will stimulate economic growth, create jobs, and boost productivity. However, large-scale infrastructure projects carry financial risks, including cost overruns, delays, and potential budget deficits that could strain public finances. Fiscal authorities have shown a lack of monitoring and evaluation, as the public is still awaiting a report on the generation of sustainable employment and infrastructure projects that have contributed to the overall economic growth, which is a point of concern. On the other hand, infrastructure investment may be vulnerable to corruption, mismanagement, and lack of transparency, leading to inefficiencies and suboptimal outcomes. These are some of the aspects that fiscal authorities need to look at and put necessary measures in place to ensure the success of infrastructure projects. Some of the key macroeconomic variables that were highlighted in the budget speech are the following:

The national government's debt, which is projected to reach approximately 75,3% of the Gross Domestic Product (GDP) by 2025/26.
The budget deficit for 2023/24, which is expected to worsen to 4,9% of the GDP.
The debt-service expenses which are anticipated to increase is now estimated at R356 billion, representing more than 20% of revenue – surpassing the budgets allocated for social protection, health, or peace and security.

Given the economic challenges reflected in these macroeconomic variables, the minister has indicated that immediate reform will be through the 30% utilisation of the GFECRA, which has grown to more than R500 billion. Therefore, the government plans to use R150 billion from GFECRA, expecting a decline of approximately R30,2 billion in government debt servicing costs over the 2024 Medium Term Expenditure Framework (MTEF). The use of the account is effective, because the account provides liquidity in times of need, allowing the government to meet its financial obligations without resorting to external borrowing. Given that the account resides with monetary authorities in the South African Reserve Bank (SARB), fiscal authorities will find that GFECRA has restrictions on utilisation, limiting the government's flexibility in responding to immediate financial needs or emergencies. Moreover, depending on the size and management of the GFECRA, it could impact market perceptions of the country's financial health and credibility.

Tax and revenue

The weak performance of the economy has been identified as a significant factor contributing to a sharp decline in tax revenue collection for 2023/24. It has been observed that tax revenue for 2023/24 is R56,1 billion lower than estimated in 2023. The minister highlighted the implementation of a global minimum corporate tax, which is projected to generate R8 billion in corporate tax revenue by 2026/27. Additionally, measures will be taken to target multinational corporations with annual revenue exceeding a certain threshold. General solutions for revenue generation were proposed, which included the following:

Focusing on excise duties for alcohol products, with increases ranging between 6,7% and 7,2% for 2024/25
A 4,7% increase in tobacco excise duties on cigarettes.

Implementing these tax proposals and improving revenue collection will boost government revenue, allowing for the funding of essential services, infrastructure projects, and social programmes. This enhanced revenue generation will also contribute to fiscal stability by reducing budget deficits and public debt levels over time. However, fiscal authorities must prioritise modernising tax administration and combating illicit activities to enhance tax compliance, ensuring that all taxpayers contribute their fair share.

Social security and government spending

In the budget speech, the minister demonstrated an awareness of the pressing realities confronting South African society by announcing adjustments to social grants in line with inflation. The grant changes included, among others

R50 increase to the foster care grant;
Child Support Grant increases from R510 to R530;
Older Person’s Grant increases by R90 on 1 April and R10 in October 2024; and
COVID-19 Social Relief of Distress Grant of R350.

However, it is crucial to recognise that these increases may still fall short of adequately addressing the needs of those living below the poverty line, especially considering the high levels of unemployment and the rising cost of living. Moreover, while there is a commendable effort to provide support through these grant adjustments, fiscal constraints pose significant limitations. The government must navigate carefully to ensure that these increases are sustainable within the broader fiscal framework. Balancing the imperative to support vulnerable populations with fiscal prudence is a delicate task, requiring careful consideration of both short-term relief measures and long-term fiscal sustainability. Ultimately, while the announced increases in social grants represent a step towards addressing the immediate needs of vulnerable communities, policy makers must continue evaluating and refining these measures to ensure they effectively alleviate poverty and inequality while remaining fiscally responsible. Other critical government spending was pointed out in the budget speech, including the following:

An additional R25,7 billion was allocated to the education sector’s wages.
Childhood development grants increased to R2 billion over the medium term.
The health sector to be allocated a total of R848 billion over the Medium-Term Expenditure Framework (MTEF) for health.
An allocation of R61,4 billion for employment programmes over the medium term.
A R7,4 billion for the Presidential Employment Initiative.

The effectiveness of government spending by increasing wages in the education sector is welcome, as it could attract and retain qualified educators. However, it is essential to consider whether these increases are accompanied by measures to address broader challenges within the education system. Simply increasing wages without addressing issues such as inadequate infrastructure, resource shortages, and administrative inefficiencies may limit the overall impact on educational outcomes. To maximise effectiveness, it is crucial for the government to also invest in building new schools, providing resources for the day-to-day running of schools, and implementing reforms to improve the quality of education.

On the other hand, regarding spending on employment programmes and initiatives to address unemployment, effectiveness will depend on fiscal authorities' design and implementation of these programmes. Allocating funds to employment programmes could potentially create job opportunities and reduce unemployment rates, particularly among artisans and recent graduates. However, there is still a need for alignment of employment programmes with the needs of the labour market, the provision of relevant skills training and support services, and the creation of sustainable job opportunities. Additionally, effective monitoring and evaluation mechanisms are essential to ensure that spending on employment programmes yields tangible outcomes.

In conclusion, the 2024 Budget Speech touched upon various critical challenges facing the nation, including economic growth constraints, Eskom's challenges, rising government debt, tax revenue shortfalls, and the need for social security enhancements. The budget speech regained the need to address these challenges effectively and pointed out the importance of ensuring that fiscal policies prioritise equitable distribution of resources and effective management of public finances. Key areas for fiscal policy focus included continued investment in infrastructure projects, coupled with public-private partnerships, which can stimulate economic growth, create jobs, and enhance productivity. It has been noted that enhancing revenue generation through effective tax policies, such as corporate tax reforms and excise duty adjustments, can bolster government revenue. On the other hand, social grant adjustments were deemed to be vital for supporting vulnerable populations, but efforts to address poverty and inequality should extend beyond grant increases. The speech acknowledged that investments in education, health care, and employment programmes are essential to promote inclusive growth and reduce socio-economic disparities.

Did the budget speech address current challenges? Yes, the 2024 Budget Speech addressed many of the current challenges facing South Africa. However, moving forward, fiscal authorities need to prioritise structural reforms, innovation, and inclusive economic development strategies to address South Africa's economic and social challenges effectively. Exploring opportunities for public-private collaboration, leveraging technology for efficient service delivery, and promoting entrepreneurship and small business development can contribute to long-term sustainable growth and prosperity. Additionally, maintaining a conducive policy environment, fostering investor confidence, and strengthening governance and institutional capacity are crucial for achieving lasting economic resilience and social progress.

The views presented here are mine, they do not represent the views and policy position of the institution I am affiliated with. I do this for community outreach as a person in academics only.

News Archive

During 2011: Achievements at the UFS

2011-12-01

Sarah Shannon

Dr Alex Amtaika, Department of Political Science

During a conference at Khon Kaen University in Thailand, Dr Alexius Amtaika from our Department of Political Science was elected as Executive Director and Convener of the International Committee of Scholars of Local Government. This honour was bestowed upon Dr Alexius during the first International Conference on Local Government at Khon Kaen University.

Sarah Shannon

We all have heard stories about inspirational people, who defy the odds, fight circumstance every day and never give up. Sarah Shannon has cerebral palsy but has never stopped dreaming and achieving them.

Sarah is also a competitive swimmer, and is currently ranked seventh in the world in her class of disabilities.

She is currently completing her postgraduate certificate in Education, Foundation Phrase, through Unisa. She is also studying Sociology at our university.

DW Bester and Sannah Mokone, Rhodes Scholars

Of the four open Rhodes Scholarships available to students from all universities in Southern Africa, two of our students won these prestigious scholarships. DW Bester, B.Sc. Hons. Actuarial Science student, and Sannah Mokone, BPub-cum laude student, joined Oxford University in the United Kingdom in September 2011 to further their studies.

The Rhodes Scholarships, arguably one of the most prestigious scholarships in the world, were founded in 1903 in the will of Cecil John Rhodes and cover the full costs of study at Oxford University.

While academic excellence is a pre-condition for consideration for the Rhodes Scholarship, these scholarships are unique in that Rhodes Scholars are outstanding young students who excel academically, but very importantly, demonstrate leadership, are committed to making a difference in the world, and have the energy to fulfill their ambitions.

Dr Derik Coetzee, Department of Sport and Exercise Sciences

When you suddenly receive a call during a World Cup year and requested to come and assist in leading the Springboks, then you have to know, you have something to offer. This is what happened to Dr Derik Coetzee from our Department of Exercise and Sports Sciences. This year he once again became involved in the Springbok rugby team, after he had been die Bokke’s conditioning trainer from 2004 to 2007.

His primary task as conditioning head was to help in seeing to it that the Springboks reached their best level of play – psychologically, physically an emotionally. Amongst others, his duties included the optimisation of the players’ muscle and explosive power, speed, anaerobic ability and technical skills.

Jefferson J Dirks-Korkee en Mart Kotzé

Jefferson J Dirks-Korkee, from Willowmore in the Eastern Cape, and Mart Kotzé from Bloemfontein, recently made history by being the first students from our Department of Drama and Theatre Arts featuring in an Afrikaans South African film Skoonheid, the first ever to be shown at the Cannes Film Festival.

The movie won the Queer Palm Award at the 2011 Cannes International Film Festival, where Robert de Niro was the chairperson of the panel of judges.

Prof. Muriel Meiring, Department of Haematology and Cell Biology

Prof. Muriel Meiring, Specialist Scientist in our Department of Haematology and Cell Biology, is responsible for establishing the Specialised Haemostasis Laboratory at our university and the Universitas Hospital’s National Health Laboratory Service. She established this centre as a reference centre for Von Willebrand disease, a genetic bleeding disorder, in South Africa. This laboratory is internationally recognised for their research and as a reference laboratory.

Prof. Meiring develops and tests antithrombotic (anti-clotting) agents and her long list of publications, research awards and congress presentations has earned her a nomination for the Department of Science and Technology’s Distinguished Woman Scientist Award. She was one of two scientists of the National Health Laboratory Services (NHLS) to receive the award – Prof. Meiring being the only woman from our university.

Medical facilities from all over the country make use of her and her team’s expertise when testing for blood disorders and she hopes to expand the centre even further.

Melinda Jonker

Melinda Jonker, one of our third-year financial economic students, won the overall national competition of the prestigious Traders Trophy competition at the Johannesburg Stock Exchange (JSE).

The competition, sponsored by Nedbank Capital and Oxyor in Amsterdam, requires participants to trade actual JSE-listed shares against one another on a simulated platform. The winner is determined not only by the highest profit, but also by the technique used throughout the trading session.

Christopher Diab, also a student from our Department of Economics, won the regional UFS competition.

ASSAf members

Seven of our academic colleagues have been elected as members of the Academy for Science of South Africa (ASSAf). They are Proff. Hendrik Swart, Physics; André Roodt, Chemistry; Zakkie Pretorius, Plant Sciences; Max Finkelstein, Mathematics; James du Preez, Microbial, Biochemical and Food Biotechnology; Maryke Labuschagne, Plant Breeding; and Neil Roos from our Postgraduate School.

Due main objective of the Academy is to promote and apply scientific thought in the service of the society, in order to determine the quality and scope of the role that the Academy can plays in the country’s life and progress, and eventually apply it

Other colleagues who are currently members of ASSAf include Proff. Jonathan Jansen, Vice-Chancellor and Rector; Johan Henning, Dean: Faculty of Law; and Frans Swanepoel, Senior Director: Research Development.

Samantha Renda-Dollman

Samantha Renda-Dollman, a BSc (Zoology) student on our Qwaqwa Campus, has obtained 19 distinctions out of the 22 modules she has written since 2009.

Her hard work earned Samantha the prestigious Dux Student award of our 2011 Annual Student Affairs Excellence Awards, held at our Qwaqwa Campus. This makes her the best overall academic performer of the entire student body on this campus.

Jaco Griessel

Jaco Griessel, an Honours student at our Odeion School for Music, received a prestigious Mandela Rhodes bursary for 2012 to study towards his Master’s degree next year.

Jaco, who is currently busy with his BMus Honours degree, is a performer par excellence, with many achievements to his name. In 2010, he received the Fanie Beetge Prize for the best undergraduate student in Systematic Music Studies. A year before, he received the same prize as best undergraduate student in Historic Music Studies. He shall continue his Master’s degree with Music Composition as field of specialisation at our university in 2012.

Prof. Helena van Zyl, UFS School of Management

Prof. Helena van Zyl, Director of the UFS Business School, was elected as President of the South African Association of Business Schools (SABSA). Since the beginning of 2010 she has been acting as president. Prof. Van Zyl is the first woman to occupy this position and also the first woman who is currently heading a business school in South Africa. She will serve SABSA as the president for the next two years.

Prof. Zakkie Pretorius, Department of Plant Sciences

Research by Prof. Zakkie Pretorius from our Department of Plant Sciences, has become part of Phase II of a mayor global project to combat deadly strains of a wheat pathogen that poses a threat to global food security.

Prof. Pretorius focuses on the identification of resistance in wheat to the stem rust disease and will assist breeders and geneticists in the accurate phenotyping of international breeding lines and mapping populations. In addition, Prof. Pretorius will support scientists from Africa with critical skills development through training programmes.

The Ug99 strain was discovered in Kenya in 1998, but are now also threatening major wheat-growing areas of Southern and Eastern Africa, the Central Asian Republics, the Caucasus, the Indian subcontinent, South America, Australia and North America.

Prof. Danie Strauss, research fellow in the Faculty of Humanities

Prof. Danie Strauss, a research fellow in our Faculty of the Humanities, won the Dooyeweerd Prize from the Board of the Association for Reformational Philosophies in Amsterdam. Prof. Strauss, former Dean of our Faculty of the Humanities and head of our Department of Philosophy, won the prize for his book Philosophy: Discipline of the Disciplines. The prize is awarded for work in the field of systematic philosophy.

Nida Jooste and Ryan Lamb, Abe Bailey Travel Bursary holders

Nida Jooste and Ryan Lamb are two of the proud recipients of Abe Bailey Travel Bursaries. Both students are academic achievers, but also excel in other fields. This is what set them apart from the rest of the applicants for the bursaries.

Ryan (23), a Medical Physics Honours student at our Faculty of Health Sciences, received the Senate’s Medal for the best Bachelor’s Degree student at the UFS. He was one of 100 students at the Brightest Young Minds Summit this year and was one of the 2008 delegates to the World Youth Forum, hosted by the International Association for Poetry and Solidarity in Italy.

Nida (21) is a very familiar face on our Bloemfontein Campus, as she served as the Deputy Chairperson of our Interim Student Council in 2011.

Loerie Award for Tarran Jacobs, Elizabeth Forson and Mafohlela Mahlatsi

The creativity of a group of students from our university was rewarded with a bronze Loerie Award after they won an internal competition. Tarran Jacobs, Elizabeth Forson and Mafohlela Mahlatsi, all third-year Marketing Communication students, won the award for an advertisement they designed for Cansa.

Each year, the third-year Marketing Communication students of our Department of Communication Science have the opportunity to flex their creative muscles in the Copy-writing class. The challenge is to design two advertisements for any charity organisation by applying the knowledge they gained from the subject in a practical way. The top three groups are then entered for the Loerie and Pendoring awards – two of the most prestigious awards in the South African advertising industry.

The top three groups designed advertisements for Cansa, the South African Blood Service and Crime Line.

Hendrik Kruger and Anke Malan walk away with awards at Pfizer UKZN Young Health Scientists Research Symposium

Two students in our Faculty of Health Sciences won awards at a Pfizer UKZN Young Health Scientists Research Symposium.

Hendrik Kruger, a medical student, represented his group, which won the clinical category with the paper “Injury patterns of occupants surviving motor vehicle accidents in the Free State”. This presentation was based on a study which is the first of its kind in South Africa.

The group with Anke Malan from our Department of Nutrition and Dietetics as presenter received the prize in the community-based category with the presentation ’Knowledge, practices and perceptions of undergraduate students at the UFS regarding the risk factors of osteoporoses’. Anke’s team was also nominated as the overall winner of the symposium. Presentations were delivered in three categories, namely clinical, community-based and laboratory research.

Prof. Louis Scott, Department of Plant Sciences

Prof. Louis Scott from our Department of Plant Sciences was formally rewarded the Fellowship of Royal Society of South Africa (RSSA).

Prof. Scott is an internationally recognised Palinologist at our university and a B-rated scientist.

Fellows of the RSSA are considered to be part of a very elite group of South African scientists who have achieved international acknowledgment.

Prof. Aldo Stroebel, International Academic Programmes in the Office of the Vice-Chancellor

Prof. Aldo Stroebel has been elected as a Founding Member of the South African Young Academy of Science (SAYAS).

He is Associate Professor in our Centre for Sustainable Agriculture, Rural Development and Extension, as well as the Director of International Academic Programmes in the Office of the Vice-Chancellor.

The Young Academy has as its objectives to represent young scientists in advising the government on science and technology policy and human resource development. In addition, they will prepare the SAYAS to join the Global Young Academy (GYA) to engage with high-level international bodies, including the World Economic Forum.

Prof. Lodewyk Kock, Department of Microbial, Biochemical and Food Biotechnology

Prof. Lodewyk Kock was a sought-after keynote speaker at various conferences and seminars around the globe on our nanotechnology breakthrough research.

He delivered keynote lectures at international conferences of repute in the USA, China and Greece. In the USA he delivered a the keynote address at the Conference & Exhibition on Pharmaceutical Regulatory Affairs (Pharma-2011), held in Baltimore, and was a keynote speaker at the 2nd World Congress on Biotechnology in Philadelphia. He was also invited to present various lectures abroad.

He posted two video lectures in e-conference format on his research on the web page of the journal Translational Biomedicine. He was also invited by the International Society of Translational Medicine (ISTM) to head their “Molecular Imaging” Division.

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